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Business121_Notes_Midterm_01

Business121_Notes_Midterm_01 - Business Notes Critical...

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Business Notes Critical Success Factors -Achieving financial performance -Meeting customer needs -Building quality products and services -Encouraging innovation and creativity -Gaining employee commitment Accounting -Comprehensive information system for collecting, recording, analyzing, summarizing, and reporting in monetary terms, financial information -Distinct from bookkeeping – recording only Numerous Accounting Users -Managers – set goals, make decisions -Employees & unions – get paid and plan for benefits (figure out the amount to ask for) -Investors & creditors – estimate returns, determine growth prospects (place to invest) -Tax authorities – accurately determine tax liabilities -Government regulatory agencies – fulfill duties ex protect investor Two Main Fields of Accounting Managerial accounting – provided to managers for them to make a right choice in the business (CMA chartered management accountants) it illustrates a lot of specific information, they focus on the current information and projects the future The information should be generated fast and relevant information The only specific information is needed -CMA, Internal user’s specific information, current and future, no rule with whatever suits the form, speed is important, information must be relevant, flexible and useful. Organization presented in segments Financial accounting – (CA –Chartered Accountants) general information, historical information, GAAP principle applied and everything is presented as a whole -CA, External users, general information, historical, GAAP, precision is important, information must be complete as per GAAP, organization must be presented as whole Generally Accepted Accounting Principle Covers ranges of issues such as revenue recognition and full disclosure -Comparability – when reading the financial statement the two companies are easier to compare -Reliability – it means that company has to follow some certain rules (reliable information) -Interpretation – you need to know the assumption of the company to understand it \
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Audit -Looks at the accounting records that make sure that company is in incompliance with the GAAP rule -Independent third party meaning that whoever the auditors are they have to be from different company than the accounting firm of the company -Auditor’s statement is not 100% accurate but it’s a fair amount of representation of the company (there is no huge error that will make a difference to the company) -Auditor’s document comes with document Concepts of Accounting Cost principle – assets shown at cost of construction or acquisition (historical cost- price that was indicated when it was built) Matching principle – expenses match with revenue (both of them have to be reported) Objectivity – evidence to support value recorded (they should have recipe, invoice, or cash cheque to support it) Conservatism – always lower of cost or market value (ex. When the price of the building goes down it’s a permanent change to the building and it has to marked down lower in
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